RATCLIFF RECOVERY SERVICES LLC v. CITY PLACE INVESTORS LLC (2025)

Hurricane Ida damaged a townhome complex owned by City Place Investor, LLC d/b/a Turnberry Townhomes), which was insured under a subscription policy with a group of insurers (“Insurers”).¹ City Place hired Ratcliff Recovery Services, LLC to perform mitigation services related to Hurricane damage but was unable to pay the contracted amount. Ratcliff sued City Place for breach of contract, and City Place filed a third-party demand against Insurers for unpaid benefits for Hurricane damage under its property insurance policy, including the costs associated with Ratcliff's unpaid invoice.

After the deadline for responsive pleadings, City Place obtained a default judgment against Insurers for amounts owed under the policy, plus statutory bad faith penalties and attorney fees. Insurers later filed a peremptory exception of no cause of action and an action to annul and/or motion for new trial. The trial court largely denied Insurers’ motions but granted limited relief to clarify attorney fees and apportion damages.² The court of appeal found the trial court erred by denying Insurers’ exception of no cause of action and dismissed City Place's third-party demand.

First, despite being styled as a peremptory exception of no cause of action, Insurers’ exception is more properly characterized as a dilatory exception of improper joinder or cumulation of actions under Louisiana Code of Civil Procedure article 926(A)(7). A dilatory exception seeks to retard the progress of an action but not stop it, while a peremptory exception declares the action legally nonexistent or barred by effect of law. La. C.C.P. art. 923. Dilatory exceptions are subject to waiver, while peremptory exceptions are not. La. C.C.P. arts. 926 – 28. It is well established that an exception's “true import,” rather than its title, controls its classification, and that a court errs by treating a peremptory exception as a “trojan horse” for an otherwise waived dilatory exception. Moreno v. Entergy Corp., 2010-2268 (La. 2/18/11), 64 So. 3d 761. Here, Insurers’ exception sought to prevent the forward progress of the action rather than truly end the action. If Insurers disagreed with City Place bringing its cause of action within Ratcliff's suit, they should have raised an exception of improper cumulation. Because Insurers failed to timely raise this dilatory exception, it was waived.

Second, City Place's allegations in the third-party demand were sufficient to state a cause of action in accordance with La. C.C.P. art. 1111. Moreno, 2010-2268, p.3, 64 So. 3d at 762 (the purpose of the exception of no cause of action is to test the legal sufficiency of the petition by “determining whether the law affords a remedy on the facts alleged in the petition”). For a third-party demand, Article 1111 requires alleging facts that the third-party defendant is either the third-party plaintiff's warrantor or is liable for all or part of the principal demand. Here, the court of appeal's interpretation of the connexity requirement was too narrow. City Place alleged a clear connection between Insurers’ alleged breach under the insurance policy for the Hurricane Ida damage and City Place's breach of the mitigation contract due to a lack of recovery from Insurers for the cost of repair of those same damages. City Place's claim is based on the allegation it would not have had the funds it was owed to pay Ratcliff without Insurers first paying City Place under the policy. That is precisely the reason property owners usually buy insurance. This connection satisfies the requirements of La. C.C.P. article 1111 sufficient to defeat the exception and is in accordance with the purpose of the article. See Bennett v. DEMCO Energy Servs., LLC, 2023-01358, pp. 6-7 (La. 5/10/24), 386 So. 3d 270, 275 (“[T]he very purpose of these articles is to promote judicial economy and efficiency ․ [;] to avoid multiple lawsuits; to facilitate and expedite the trial of litigation; and, wherever possible, consistent with orderly procedure and due regard for the rights of all litigants, to dispose of all phases of an action in a single proceeding.”) (citation omitted).

Finally, Insurers timely challenged the validity of the default judgment pursuant to Louisiana Code of Civil Procedure article 2002(A)(2). Insurers aver that City Place obtained the default judgment without service or citation on the Lloyd's third-party defendants and without notice of the default hearing to any Insurers. City Place relies on service upon the Secretary of State even if the record establishes the Secretary of State did not actually forward the notice to the underlying insurer. The underlying dispute and lack of clarity concerning service on the various parties in the submissions before this Court establish that this matter should be remanded to the trial court. The default should be vacated as to any party for whom there was not proper service and notice of the proceedings. See e.g. Clark v. Clark, 10-1281 (La. App. 3 Cir. 3/9/11), 58 So. 3d 1081.

Accordingly, the court of appeal's grant of the exception of no cause of action is reversed. This matter is remanded to the trial court for further proceedings. On remand, the trial court shall reconsider the motions to vacate the default judgment.

REVERSED AND REMANDED

FOOTNOTES

FOOTNOTE.  

1.   Lloyd's Syndicate 2357 (20%); Lloyd's Syndicate 1458 (11.25%); Interstate Fire (27%); and Independent Specialty (30.5%)

2.   The judgment contains no written reasons and is silent on its disposition of Insurers’ exception of no cause of action.

PER CURIAM * FN* Guidry, J., recused.

Griffin, J., concurs in the result. Guidry, J., recused.